by Serajul Islam Quadir in Dhaka,
The COVID-19 pandemic has played havoc with the world economy and Bangladesh has its own share to deal with, but amid the challenges there are opportunities too if the government moves on the right track as it is an uphill task.
Leading economists across the world feel that during this extraordinary period the Gross Domestic Product (GDP) growth matters a little, but they are not ignoring the significance of economic growth.
At the moment people are more concerned about their health risks and livelihoods. The economic havoc has eaten away jobs and caused income losses of millions of people across the social divide. This is the reality and our policy makers should not work in line to overcome the challenges. There is no scope to be complacent.
A consensus is there on the horizon that the recession will be deeper and recovery will be slower than the projection as it depends how quickly the world is free from the deadly contagious virus.
Against the context of deep crisis arising out of the pandemic both at home and abroad, the Bangladesh National Parliament in June this year the budget for the fiscal 2020-21 which the Finance Minister AHM Mustafa Kamal placed for consideration.
The budget worth Taka 568,000 crores is the largest in Bangladesh’s history with indications that the minister wanted to please all sections of the country. Despite an uncertain and bleak future in terms of recovery of the global economy, the budget aims to achieve 8.2 percent economic growth (GDP).
The budget has allocated a total of 29,247 crore taka for overhauling the health sector, as the sector which has been thrashed by the Covid-19 pandemic. The government has taken up a comprehensive plan with strategies discouraging luxury expenditures and prioritizing government spending that creates jobs. The new fiscal measures, that came into effect from 1 July 2020, hiked excise duty on bank accounts with significant balances in a bid to increase revenue collection.
The agriculture sector, which became the hero of Bangladesh during this pandemic, is the second highest priority in the budget.
The Finance Minister has tasked the National Board of Revenue (NBR) to ensure collection of Taka 330,000 crore, which to me is also another highly ambitious target.
Along with the economists, I too feel that the targets of the GDP growth and revenue collection should be revised downward and policy makers need to be more realistic.
We believe that the government is sincere in getting the economy back on track as soon as possible, but it is imperative to consider the views mentioned and make assertive moves right away to control the pandemic wreaking havoc on the socio-economic landscape, business, mindsets and lives of Bangladesh. We, the people of Bangladesh require socio-economic recovery from this crisis by being united in our efforts.
Immediate steps are required to synchronize both the public and private sectors before the clock stops ticking. For instance, if the government can revisit the budget of 2020-2021 and make necessary re-allocations as well as re-direct funds from its treasury then it would prove to be much more beneficial for the entire country.
Internal funds (from budget surplus) could be kept aside and disbursed using good governance and transparent tracking of funds along with accountability to mobilize resources and provide subsidies with special provisions/legislations by the government to open a ‘Job Keeper Benefits’ scheme applicable to both the employers and the employees.
This could be implemented by the central Bangladesh Bank and the NBR through their authorized tax and book-keeping agents to support large corporations, small and medium scale enterprises (SME’s) for at least the top 10 to 15 sectors of this South Asian country to be identified by the Bangladesh Investment Development Authority (BIDA) and the other chambers of commerce and industries that has the potential as well as demonstrated financial willingness and capabilities to contribute positively towards the GDP of our country.
Similar types of schemes/temporary reliefs could be applied to creating ‘Unemployment Benefits’, ‘Urban and Rural Socio-Economic Benefits’, ‘Healthcare Benefits’ and increasing the public and private sectors key role players. In the private sector, the main contributors are the business community.
The central banks and NBR can together grant a six-month (extendable depending on the Covid situation) deferral on loan repayments on mortgage, personal credit products, defer principal and interest repayments on all loans attached to any business. The interest will be capitalized (that is, extended) and paid off over the life of the loan.
This type of businesses to be all-inclusive, ranging from the big businesses to SME’s to any type of commercial and non-commercial businesses (including not-for-profits and landlords). This will keep people from being ejected from their homes or businesses as they struggle to pay rents and utility bills.
|If we do not step up our move on the measures to bring the economy back on track, we will not survive, let alone be on the top of this crisis because this situation is much graver than the Great Depression of the 1930s. We feel that to turn the challenges of the budget as an opportunity we need further allocations for health sector; impose more tax on undisclosed money. The policy makers should understand that heavy borrowing plans from banks will harm the private sector and also realize that the targets for GDP growth and revenue collection are unrealistic. Customs act needs upgraded and also needs more focus on railway and waterway development. |
We must reduce corruption and bureaucracy to attract foreign direct investment (FDI). Planning Minister M.A. Mannan in a recent virtual meeting said that despite increased allocation for the health sector in the national budget for the fiscal year of 2020/2021 the allocation might rise further if and when necessary considering the present crisis due to pandemic in the country along with other parts of the world. He told his audience that the health sector has already received the highest priority to save lives and also to maintain economic activities as it is the “back-bone” the economy. Prime Minister Sheikh Hasina has pledged to give the health sector the highest priority.
He said that the government approached the World Bank, International Monetary Fund (IMF) and the Asian Development Bank (ADB) to finance as the budget support to assist the projects as the health related projects are the priority. The government itself can also allocate large amount of funds for the sector, but the problem is our capability to utilize it properly with graft remaining a major problem. In the national budget for the ongoing fiscal year, the government has taken certain measures in support for protecting critical domestic industries and for attracting more investment even in the crisis to boost the economy. Yet, I think the proposed budget would be highly challenging in the current pandemic and we would like to highlight few of our concerns. The epidemic has thrown the inadequacies of Bangladesh’s health sector into sharp contrast. As expected, the budget allocated Taka 29,247 crore for the health services and education sector, up by 23.44 percent from last year’s revised allocation, still much below our expectation considering the current situation.
We are yet to learn totally about the specific guideline on the ‘mega plan’ for the sector, which includes a medium-term 3-year plan and a 10-year long-term plan addressing overcome to the fragile sector exposed by the crisis. Special attention and upward allocations are needed for the communication and transportation sector as it is one of the most important infrastructural elements to boost the trade and investment alone. Apart from the roads and airways, if we focus more on developing waterways and railways it would also help the common people to reduce the cost of transportation for both goods and passengers ensuring a smooth supply chain in a country which is a plain delta and criss-crossed by more than 400 rivers and canals.
Our position is to discourage the move to legalize the undisclosed wealth or money by paying a 10 percent tax which as we feel it is “unethical”.
However, the opportunity to stimulate the capital market, industrial investment or any productive sector to generate employment may be acceptable. We feel that the rate should be higher than that of 10 percent otherwise it might discourage the regular taxpayers of the country. The plan to borrow from the banking system to finance the budget deficit should be discouraged. We believe private sector credit growth will be hampered if the government borrowed the total amount from the banks, worsening the existing liquidity crisis.
We urge the central bank to devolve a major portion of the borrowed amount on its own accounts, which would also help boost money supply in the market. If the government borrows heavily from the banking sector, it will affect credit flow and investment in the private sector. The government plans to borrow 85,000 crore taka from banks in order to meet the deficit in the proposed budget for fiscal year 2020-21. Over-borrowing will hamper funding for private investors, who are going through a tough time due to the coronavirus pandemic. Considering the situation, the government should reduce unnecessary spending on sectors like foreign travel, office decoration with hard earned money or from government exchequer and focus more on farm mechanisation, implementing social safety net programmes and rural development.
Besides, drastic and tough measures are needed to curb wide spread corruption to ease new investments and businesses. An efficient bureaucracy and rule of law are also crucial for attracting both domestic and foreign direct investment.
The Anti-Corruption Commission should carry out their duties without fear or favour while the organisation itself should be assessed to improve its efficiency.
Due to months-long lockdown in recent past both domestic and foreign investments have slowed down. To remedy the situation, the government needs to make the present budget as realistic and pragmatic. The government’s target to achieve a 55 percent increase in revenue collection might not be met due to coronavirus fallout. The government must bring substantial reforms to the tax administration to improve tax collection and remove corruption in the bureaucracy.
There are not many provisions for poor people in the budget but the government will have to take some measures soon in order to feed the nearly 50 lakh people who either lost their jobs or had their income slashed due to the pandemic.
Most of the borrowers, especially micro, cottages, small and medium enterprises, are not receiving funds from the government’s Taka 20,000 crore stimulus package since the banks’ profit margin is around 1 percent. With such a low profit margin and high operation costs, banks have lost interest in disbursing funds from the stimulus package. The profit margin should be around 3 percent at least. We trust that the pro-people government under the leadership of Prime Minister Sheikh Hasina will consider all these aspects discussed in this piece to achieve full benefit of the economic measures taken so far. The fruits will trickle down to the have-not section of the country.